Advocates: Free market doesn't work for online privacy

Web and mobile device users have little understanding about how much of their personal data is collected online, making it difficult to rely on free-market competition for solutions to privacy concerns, privacy experts told the U.S. Federal Trade Commission Thursday.

The FTC or the U.S. Congress needs to set clear online privacy rules, said some speakers at an FTC workshop on comprehensive online data collection. Other speakers suggested that competition among Internet and device companies and privacy notification efforts by industry groups can work, even if some Web users don't seem to care or understand about data collection.

Some services, including search engines, browsers and social networks, are offering their products based on privacy tools or policies, Markham Erickson, general counsel for the trade group the Internet Association.

Consumers will punish companies with bad privacy practices, added Stuart Ingis, counsel for the Digital Advertising Alliance, another trade group. "The market reacts when they see a business practice they don't like," he said.

There's still an open question about the harm to consumers from data collection, some speakers said.

Harm to a consumer's reputation may be a factor, but "if you can't articulate what the harm is, you can't prevent it," said Howard Beales, a business professor at George Washington University and former director of the FTC's Bureau of Consumer Protection. "If the only harm we're worried about is speculative possibilities of what might happen at some point in the future, what we're likely to do is preclude a lot of really useful new services on the horizon that none of us has thought of yet."

But it's difficult for Web and mobile users to make informed decisions about Web-based products because much of the data collection happens behind the scenes, other speakers said. "It's hard to compete on something people don't know about," said Ashkan Soltani, an independent security researcher and consultant.

When researchers ask people about online data collection, many have little knowledge of the topic, said Lorrie Faith Cranor, a privacy researcher and computer science professor Carnegie Mellon University. Many people, when first learning about comprehensive data collection, find it "very creepy," although some people's opinions improve when learning the data collection is generally used to deliver targeted ads and customized services, she said.

"They also feel like, 'I seem to have given a blank check for these companies to collect my data and do whatever they want with it,'" she said.

Still, some Web users are acting in ways that suggest they understand data collection, Beales said. Many Web users are starting to use multiple networks, multiple devices and multiple browsers and are deploying encryption technologies, he said.

No online company has a "single, comprehensive view" of a Web user's personal data, Beales added. "Consumers really have diversified their risk," he said. "There's nobody that's sitting on a choke point that everything goes through and that has a comprehensive picture of what's going on.

Part of the focus at the FTC workshop was on deep-packet inspection, or DPI, a technology that can be used by ISPs and some other companies to inspect the content of packets as they travel across the Web. The problem, however, isn't with DPI, but with how it's used, Erickson said.

ISPs can use DPI for several good reasons, including preventing cyberattacks, Erickson said. But concerns about DPI have come up when it's used in real time to deliver targeted advertising, he noted.

Erickson and several other speakers cautioned the FTC and other policy makers to focus on bad uses of technology and not aim regulations at technologies. "We should be careful not to demonize the technology, but rather, go to the uses," he said.

Some speakers called on policy makers to trust the market to take care of online privacy problems, and allow vendors give consumers choices on when they are tracked, but others questioned that approach.

"Putting the industry who wants to track you in charge of opting out of tracking seems like putting the fox in the hen house," said Christopher Calabrese, legislative counsel for the American Civil Liberties Union. "How could I as a consumer trust you to opt me out when your entire business model is based on tracking?"

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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